How to Create Financial Security Using the Three Diversifications Pierre-Andr

How to Create Financial Security
Using the Three Diversifications
Pierre-André Gonthier
W
hen we think of diversification, we generally
think of owning different classes of assets.
Such asset diversification might take the form of
owning different stocks, bonds, mutual funds and
real estate interests.
As important as investment diversification is, it
is only one of three critical diversifications. The
other two are currency diversification and jurisdictional diversification. Innovative Swiss annuities enable wise investors to profit from all three
levels of diversification.
Let us take a look at how broadening one’s focus
to include currency and jurisdictional diversification can mean the difference between a successful
savings/investment plan and failure.
Currency Diversification
We generally think in terms of our own national
currency. When I go to the store, I am looking to
buy a franc’s worth of something. For others, it is
a dollar’s worth of this or a pound’s worth of that.
In some countries, notably the United States, it is
not possible to open accounts at the local bank in
any currency other than U.S. dollars.
Yet, the currency in which your savings and
investments are denominated can make an enormous
difference in your ultimate financial well being.
We all know what happened in 2008. The stock
markets around the world experienced steep
declines. In many countries, investors sustained
losses not seen since the Great Depression.
The currency in which you had your investments
made a difference in how you fared. Interestingly,
the most conservative investments sometimes
showed the most gain.
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How to Create Financial Security
Using the Three Diversifications
By Pierre-André Gonthier
Let’s take a look at how the dollar stood up to
several major world currencies. Our graph below
does not assume any interest return. It measures
currency appreciation alone.
US Dollar vs Foreign Currencies
2008
NZD
CAD
AUD
NOK
Jan
Feb
Mar Apr
May Jun
Jul
Aug Sep
Oct Nov Dec
Source: x-rates.com.
As we can see, the currency you choose for your
investments can make all the difference in the
world.
Let’s say that you have carefully diversified your
asset holdings and currencies. Whatever investments and savings you have can be at risk if they
are not owned in a secure legal jurisdiction.
When the wind changes, when a new administration comes to power, new laws, regulations
and “interpretations” can swiftly result in the
confiscation of hard-won wealth.
Switzerland has a strong foundation of objective
laws interpreted by an independent judiciary. An
indication of just how highly regarded the Swiss
legal system is that, when Mustafa Kemal Atatürk
founded the Turkish Republic, he adopted for his
country the Swiss civil code.
Our American clients seem particularly interested in the concept of jurisdictional diversification. This is with good reason, as the United
States originates approximately 90 percent of the
world’s lawsuits.
Unlike in some countries, in Switzerland a lawsuit is considered the last alternative, rather than
the first, in dispute resolution. Unnecessary and
frivolous lawsuits are considered very bad form
here.
Jurisdictional Diversification
Just as we think in terms of our own national
currency, we also tend to see the world through
our own legal system. Yet not all legal systems
give us the same level of protection. Ultimately,
your assets are only as safe as the legal system
that protects them.
Many of our clients come from countries where
the legal system is very much what the people in
power want it to be: a tool to reward their friends
and punish their enemies. When the wind is
blowing from the right direction, the friends of the
powerful can prosper.
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One of the first things one learns about the Swiss
legal system is that Switzerland is a loser-pays
jurisdiction. What this means is that the
loser in a lawsuit pays the prevailing party’s legal
fees. If a foreigner wants to initiate a lawsuit in
Switzerland, the court will require him to post a
bond sufficient to pay the defendant’s legal fees
should he lose.
The Innovative Swiss Annuities
Just as a weak currency can make a good investment lose value, a weak legal system can leave
one with no assets at all.
Investors the world over are looking to Swiss
annuities to manage a portion of their wealth. Let
us take a look at what is piquing their interest.
Privacy and Confidentiality
Classic Annuities™ -- The Conservative
Accumulation and Life Income
Accounts
Privacy and confidentiality are fundamental to
Swiss life. In Switzerland, we believe that your
financial affairs are your business and yours alone.
Our banking secrecy has been much in the press
these days. What is not protected -- and never has
been -- are actions taken in another country which
are also crimes in Switzerland. Thus tax fraud and
tax evasion are not protected in Switzerland..
Less well known, but in some cases offering even
more protection, is Swiss insurance law. The
protection offered by our insurance law, which
can even protect one in the event of bankruptcy,
will be discussed later when I cover the subject of
asset protection.
Swiss annuities are about as conservative an
investment as one can find. No Swiss insurer has
ever failed. Insurers in Switzerland are required
to have assets in excess of 100 percent of their
liabilities.
As conservative as they may be, however, we
know that during the financial crash of 2008,
citizens the world over achieved impressive gains
with their Swiss annuities.
Fortunately, it is perfectly legal for citizens of
almost every country to own an annuity issued by
a foreign insurer.
Many of our clients tell me some version of the
following: «I have saved and invested for many
years. As I grow older I want to take a portion
of my wealth off the financial carousel and put it
where I know it will always be safe.»
These are the people who come to see us for
either an immediate or deferred Classic Swiss
Annuity™.
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An Income You Cannot Outlive in the
Currency of Your Choice
The attractiveness of an immediate annuity is that
once the premium is paid, the life income begins
at once. Most of our clients have their income
payments wired to their local bank.The insurance
company already converts it to the local currency.
The life income can be paid on one life or jointly
on two. The annuity’s beneficiary options allow
any unused portion of the annuity to be paid out to
the person or person of the owner’s choice upon
his or her death. However, come what may, you
receive your income for as long as you live.
Foreign Currency Accumulation
Accounts
Classic Deferred Annuities™ make excellent
capital accumulation accounts.
Classic Deferred Annuities™ operate very
simply. You deposit funds with your Swiss insurance company. The funds earn interest. You may
withdraw all or a portion of your funds any time
you wish. You may also change the currency your
policy is denominated in to another major currency, should you wish. With a Classic Annuity™
you completely transfer the investment risk to the
insurance company.
At any time you have the option of converting
your Classic Deferred Annuity™ into a Classic
Immediate Annuity™ and begin to draw a lifelong income.
These annuities are issued by Swiss-insurancecompany subsidiary insurers in Liechtenstein.
The insurer provides the annuity structure, into
which you place the various assets which will
comprise your annuity’s investment portfolio.
In this way, you are able to create a tax favored,
nearly judgement proof, personal holding
structure. For example, Amercan taxpayers only
pay taxes on gains that are actually distributed
from the annuity.
The end result is a sophisticated asset management structure which is protected by insurancelaw. For example, Liechtenstein insurance law is
a near mirror of the Swiss’.
In some jurisdictions, life insurance has special
tax benefits not accorded to annuities. If this is
the case, then a life insurance death capital may
be added, creating a Strategic Life Insurance™
policy.
Strategic Annuities™*
Strategic Annuities™ are innovative investment
vehicles that allow individuals to determine the
investment make-up of their annuity.
* Specific rules apply to those subject to the
jurisdiction of the American tax system. Please
see our website at gonthiergroup.ch for complete
details regarding the rules and regulations thus
applicable
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Asset Protection and Swiss
Insurance Law
Under our legal system, Swiss annuities and life
insurance contracts are afforded special protection not otherwise available to bank accounts or
any other investment structure.
Let us look at two situations that can arise when
one’s assets and wealth are under legal attack.
Protection From Judgments
Our insurance law protects you from judgments.
For this protection to cover your policy, you need
to have named your spouse or a lineal descendent,
e.g. child or grandchild, as the beneficiary. If you
have done this, then your policy cannot be seized
by creditors.
There are two exceptions to this rule. The first
involves the situation where you have pledged
your policy as collateral for a loan. In this case,
your creditor can seize the policy if you default on
the loan. The second exception involves fraudulent conveyance.
The concept of fraudulent conveyance means that
you transferred assets as part of a deliberate plan
to defraud your creditors. During the first year
of the policy, your creditors would need to prove
your fraudulent intent. From the fourth through
fifth year after establishing your policy (or
changing the beneficiary), your creditors would
need to also prove that your primary beneficiary
shared the same fraudulent intent that you had.
This is a very hard standard to prove.
If you are adjudged bankrupt -- and this bankruptcy judgment is accepted by a Swiss court -then all of the rights you have under your policy
devolve to your next in line beneficiary.
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Thus, your policy is no longer under your control
and your creditors will be unable to seize it. Once
you emerge from bankruptcy, your rights under
the policy are fully restored.
The World of
GONTHIER GROUP SA
The world we work to create for our clients is one
where their assets are safe and secure. Come what
may, our clients have a portion of their wealth
diversified into the world’s most secure country,
protected by Swiss insurance law.
Our clients hail from many countries around the
world. Their level of sophistication varies. What
they all have in common is a search for financial
certainty in an uncertain world. They look to place
a portion of their wealth in Switzerland, beyond
prying eyes of bureaucrats and attorneys.
This is our invitation to you, to join
the world of GONTHIER GROUP SA
clients and advisors.
We welcome the opportunity to work with you
in the development of the investment structure
which best suits your needs. While we are not
investment advisors, however, should you wish,
we can introduce you to investment professionals.
As with everything we do, you the investor make
all decisions regarding your assets and how they
are managed.
We also welcome you to visit us at our website
and, of course, at our offices in Montreux. Our
contact information is:
Grand Rue 92, Case Postale 1245
CH-1820 Montreux, Switzerland
www.gonthiergroup.ch
[email protected]
Tel +41 21 962 8500
Fax +41 21 962 8501
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GONTHIER GROUP SA
8
Zurich
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GONTHIER GROUP SA
Grand Rue 92
Case Postale 1245
CH-1820 Montreux
Switzerland
www.gonthiergroup.ch
[email protected]
Tél +41 21 962 8500
Fax +41 21 962 8501